Court Rules Reassessment Based on Previously Reviewed Materials as Impermissible
The Madras High Court, in a significant ruling, has quashed the reassessment order issued against M/s. Schwing Stetter (India) Private Limited by the Income Tax Department. The court held that reopening an assessment based on information already scrutinized during the original assessment constitutes a change of opinion, which is impermissible under the law.
The case revolved around the reassessment proceedings initiated for the assessment year 2015-16. The petitioner, Schwing Stetter, had filed its return of income on November 30, 2015, including financial statements for the fiscal year 2014-15. The original assessment was completed on January 28, 2019, with no disallowance made for the net loss on foreign currency transactions reported by the petitioner.
Subsequently, a notice under Section 148 of the Income-Tax Act, 1961, was issued on March 30, 2021, to reopen the assessment. The reasons cited included disallowance of net loss on foreign currency transactions and provisions for warranty, which the petitioner argued were already provided and considered during the original assessment.
Justice Senthilkumar Ramamoorthy, presiding over the case, emphasized that the assessment was reopened based on materials already reviewed during the original proceedings. The court cited the precedent set in Pon Pure Chemical India (P) Ltd. v. Assistant Commissioner of Income-tax, reinforcing that reassessment on grounds of a change of opinion is not permissible.
The Income Tax Department's counsel contended that the reassessment was justified if the original order did not consciously consider the material on record. However, the court found that the assessing officer had indeed called for and received the relevant details during the initial proceedings, and the original order explicitly addressed the provision for warranty.
Consequently, the court set aside the reassessment order and the preceding notices, closing the case in favor of Schwing Stetter. This judgment underscores the legal boundaries on reassessment proceedings, reinforcing that they cannot be used as a tool for revisiting previously settled matters based on unchanged facts.
Bottom line:-
Reassessment under Section 148 of the Income-Tax Act, 1961 based on materials already provided with the original return of income and considered during the original assessment amounts to a change of opinion, which is impermissible.
Statutory provision(s): Sections 142(1), 148 of the Income-Tax Act, 1961
